According to media reports on Friday, September 13th, the chip manufacturer $Intel (INTC.US)$ Company has reached a binding agreement with US officials, stating that the company has officially qualified for up to $3.5 billion in federal funding to produce semiconductors for the Pentagon.

The project is called "Secure Enclave" and will produce advanced chips for the military and intelligence departments. According to reports, the project will involve multiple states in the US, including Intel's manufacturing facility in Arizona.

The above sources also pointed out that this grant may be announced as early as next week.

Funding for the "Chip Act"

According to reports, the funding for the "Secure Enclave" project comes from the "Chip and Science Act" funding program managed by the US Department of Commerce.

Once the project was reported, Intel's stock price started to rise during Friday's closing period, closing the day with a 1.55% increase to $19.66. However, as of Friday's close, the stock has fallen 61% this year.

In March of this year, according to the "Chip Act" signed by President Biden, the US Department of Commerce issued a statement stating that the government decided to provide Intel with a $8.5 billion grant and $11 billion in loans. The purpose of this act is to revitalize the US semiconductor manufacturing industry.

Intel is negotiating with the government on the terms of a broader incentive program, hoping to expand government support to factories in Arizona, Ohio, New Mexico, and Oregon.

Like other beneficiaries of the Chip Act, Intel has not yet received any incentive funds because these funds are considered preliminary. There have been reports that due to Intel's significant decline in performance, the company may not be able to successfully obtain the subsidies from the US government mentioned above.

Intel's Troubles

From Intel's own perspective, the company did indeed run into trouble this year. Last month, Intel released a disappointing performance report and revenue forecast, causing the stock price to plummet and shattering confidence in CEO Pat Gelsinger's ambitious transformation plan.

Since Gelsinger took over Intel, the company has been betting its future on contract manufacturing, attempting to enhance its ability to manufacture advanced chips for its own company and other companies at its US foundries.

Now, this chip manufacturer is actively reassessing its manufacturing strategy. Insiders previously indicated that Intel may delay or halt semiconductor fab projects outside of the United States.

This time, its 'secure enclave' agreement with the US military suggests that Intel may be exploring new paths. And the US government also believes that Intel will take on this deal.

For chip manufacturers, the Pentagon is often a challenging customer. A recent report by the National Academy of Sciences, Engineering, and Medicine found that companies involved in previous Pentagon projects often struggle to meet the requirements of the Department of Defense and struggle to generate investment returns from these orders.

In addition, this trade actually reflects the fact that the Biden administration lacks other options: Pentagon officials insist on procuring cutting-edge semiconductors from a US company, and Intel is the only advanced processor manufacturer in the USA. Other manufacturers, including$Taiwan Semiconductor (TSM.US)$and Samsung Electronics, both of these companies are supported by the 'Chip Act' to build factories in the USA, but neither of them are US companies.

Editor/Rocky